Crypto Energy Consumption – Exaggeration Or Real Threat?

Dominik Olech
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Sometimes we may forget that bitcoin’s life begins not at the mining computer, but in the powerplant. But how much energy does the mining process precisely cost us?

I have to admit: I used to believe almost undoubtedly that the Bitcoin mining process is highly energy-intensive. All reports about it really hit your imagination. However, the case is much more complicated than it might seem. That’s why I decided to do some research about the energy consumption of the Bitcoin network.

The machine which never rests

First, we should spare some words on a short explanation of the mining process. Bitcoin, alongside with many other cryptocurrencies, uses proof of work to verify new transactions. To do so, computers connected to the blockchain network resolve mathematical tasks needed for block verification. 

Data obtained this way is both easy to check, but also hard to get. Such a process is resource-intensive, but it is necessary to ensure the stability of the whole network. And it works perfectly fine at the beginning. But since the interest of Bitcoin has grown dramatically fast, the demand for mining is also growing, as is the energy consumption. 

Devourer of electricity

Over the last few months, the topic of crypto energy consumption has been discussed more frequently. In July, the University of Cambridge launched an online tool called Cambridge Bitcoin Electricity Consumption Index. The main goal of CBECI is to track the energy used to maintain the Bitcoin network online. At the moment of the start, the index showed data of 64.15 TWh (terawatt hour) per year, which was spread widely in media. The Verge compared this number to Switzerland’s energy consumption, the same as RT.

Those statistics were indeed shocking. Moreover, this number has significantly grown since then. At the moment of writing of this article, CBECI shows that total annual electricity consumption of the Bitcoin blockchain is 77.19 TWh – almost the same amount as the Philippines. But, is the situation really so bad?

Various numbers

Although the case of energy consumption seems worrying, there are some major incompatibilities in all data available about it. For example, Rett Creighton, creator of ZClassic and Bitcoin Private, pointed at the number of 55 TWh, which significantly differs from Cambridge data.

Data on willingly quoted by crypto media Statista was also slightly varying. It’s easy to get lost in all those statistics. What leads us to the question: where those data come from?

The University of Cambridge gives a straightaway answer for this question, with specific methodology provided. It’s, after all, a university – it should depend on providing well-proven data. The next reason why data gathered in CBECI seems relevant is the similarities that it shares with another popular index.

We are talking about Digiconomist, which is made by a Dutch blockchain specialist Alex de Vries. In this particular one, energy consumption by the Bitcoin network is 73 TWh. This number seems to be close to CBECI outcome, which is clearly visible on the chart by Per Poplyus:

Good sides of wrong?

Even if we average out available data, the amount of energy consumed by the Bitcoin network is still comparable to a medium-sized country. And that’s only the data for one cryptocurrency – the most significant one though. Other coins aren’t so bad. For instance, Digiconomist index for Ethereum determines consumption on 7,5 TWh:

And we have to remember that this specific coin is based on proof of stake. This consensus algorithm is designed to be more energy efficient in contrast to proof of work used in Bitcoin. As we may read on Digiconomist, de Vries sees an opportunity in that method – but we still have to wait for it to develop further..

Another consoling aspect of this case is efficiency. As we may read on Cointelegraph, the Bitcoin network is using considerably less energy if we compare it to the hash rate. Back in 2018, when the energy consumption of this cryptocurrency was similar to current, the hash rate was almost 60% lower. 

But on the other hand, it is a predictable outcome. Mining software is developing continuously, and new solutions are being introduced year by year. It might also be a sign of growing ecological awareness among miners. Nevertheless, both are good signs for the industry.

Outside the blockchain

So, we know the Bitcoin is consuming quite a lot of energy. However, how much is that sum exactly? The terawatt hour doesn’t speak well to our imagination. It is better to compare it with some European countries, but we still have room for other comparisons.. Let’s take a look at two examples – the most interesting, in my opinion.

First comes from the University of Cambridge. It uses an example of energy usage in inactive home devices in the USA. They are still plugged into an energy network, so they consume some small amounts of energy.

Source: https://www.cbeci.org/comparisons/

Quite a big number. On the other hand, let’s take an example from Digiconomist. Alex de Vries decided to compare energy consumption between Bitcoin and Visa transactions. The effect is impressive too.

Source: https://digiconomist.net/bitcoin-energy-consumption

A matter of perspective

So, what does the overall situation of mining energy consumption look like? We might never know for sure. Some pieces of information are hard to be obtained. The scale of the whole Bitcoin network is enormous, and its decentralized nature doesn’t help in proper research. 

And there’s a difference. Two charts above rely on the same data: Bitcoin energy consumption per year. However, because of different objects to compare with, their overtones might be drastically different. The first one implies that Bitcoin situation isn’t that bad – since we’re wasting twice as much energy by simply doing nothing. The second chart, in contrast, shows how poor Bitcoin efficiency is in comparison with commonly used VISA. 

That leads us to the conclusion. There have been many various charts, graphs, and diagrams concerning this case – and many more will come in the near future. But none of them will show 100% of the truth. There is always a moment when we choose which piece of information is worth mentioning – especially in data analysis and visualization. That’s why checking various available sources is essential. Only then, we can take a look at some cases from a broader perspective.

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